Related papers: The Zero-Coupon Rate Model for Derivatives Pricing
In this paper, a pricing formula for volatility swaps is delivered when the underlying asset follows the stochastic volatility model with jumps and stochastic intensity. By using Feynman-Kac theorem, a partial integral differential equation…
This article present a continuous cascade model of volatility formulated as a stochastic differential equation. Two independent Brownian motions are introduced as random sources triggering the volatility cascade. One multiplicatively…
We propose a fast and accurate numerical method for pricing European swaptions in multi-factor Gaussian term structure models. Our method can be used to accelerate the calibration of such models to the volatility surface. The pricing of an…
The present paper proposes a new framework for describing the stock price dynamics. In the traditional geometric Brownian motion model and its variants, volatility plays a vital role. The modern studies of asset pricing expand around…
We present a stochastic local volatility model for derivative contracts on commodity futures. The aim of the model is to be able to recover the prices of derivative claims both on futures contracts and on indices on futures strategies.…
We present a quantitative study of the markets and models evolution across the credit crunch crisis. In particular, we focus on the fixed income market and we analyze the most relevant empirical evidences regarding the divergences between…
We present an arbitrage-free non-parametric yield curve prediction model which takes the full (discretized) yield curve as state variable. We believe that absence of arbitrage is an important model feature in case of highly correlated data,…
We present two models for incorporating the total effect of market microstructure noise into dynamic pricing of assets and European options. The first model is developed under a Black-Scholes-Merton, continuous-time framework. The second…
This paper focuses on the pricing of the variance swap in an incomplete market where the stochastic interest rate and the price of the stock are respectively driven by Cox-Ingersoll-Ross model and Heston model with simultaneous L\'{e}vy…
We study a single risky financial asset model subject to price impact and transaction cost over an infinite horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in fixed…
Conditions of Stability for explicit finite difference scheme and some results of numerical analysis for a unified 2 factor model of structural and reduced form types for corporate bonds with fixed discrete coupon are provided. It seems to…
This paper addresses the problem of pricing involved financial derivatives by means of advanced of deep learning techniques. More precisely, we smartly combine several sophisticated neural network-based concepts like differential machine…
We consider the problem of designing a derivatives exchange aiming at addressing clients needs in terms of listed options and providing suitable liquidity. We proceed into two steps. First we use a quantization method to select the options…
In this survey paper we discuss recent advances on short interest rate models which can be formulated in terms of a stochastic differential equation for the instantaneous interest rate (also called short rate) or a system of such equations…
One of the risks derived from selling long term policies that any insurance company has, arises from interest rates. In this paper we consider a general class of stochastic volatility models written in forward variance form. We also deal…
In this work we derive an approximated no-arbitrage market valuation formula for Constant Maturity Credit Default Swaps (CMCDS). We move from the CDS options market model in Brigo (2004), and derive a formula for CMCDS that is the analogous…
We model incentive security in non-custodial stablecoins and derive conditions for participation in a stablecoin system across risk absorbers (vaults/CDPs) and holders of governance tokens. We apply option pricing theory to derive closed…
We consider the consumption-based asset pricing model, derive a new modified basic pricing equation, and present its successive approximations using the Taylor series expansions of the investor's utility during the averaging time interval.…
We consider implied volatilities in asset pricing models, where the discounted underlying is a strict local martingale under the pricing measure. Our main result gives an asymptotic expansion of the right wing of the implied volatility…
We introduce Hermite fractional financial markets, where market uncertainties are described by multidimensional Hermite motions. Hermite markets include as particular cases financial markets driven by multivariate fractional Brownian motion…